Amgen 2007 Annual Report Download - page 70

Concentration of sales at certain of our wholesaler distributors and consolidation of free-standing dialysis
clinic businesses may negatively impact our bargaining power and profit margins.
The substantial majority of our U.S. product sales are made to three pharmaceutical product wholesaler dis-
tributors, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. These distributors,
in turn, sell our products to their customers, which include physicians or their clinics, dialysis centers, hospitals
and pharmacies. One of these products, EPOGEN®, is primarily sold to free-standing dialysis clinics, which have
experienced significant consolidation. Two organizations, DaVita Inc. and Fresenius own or manage a large
number of the outpatient dialysis facilities located in the United States and account for a significant majority of
all EPOGEN®sales in the free-standing dialysis clinic setting. In October 2006, we entered into a five-year sole
sourcing and supply agreement with an affiliate of Fresenius, on its behalf and on behalf of certain of its affili-
ates, to purchase, and we have agreed to supply, all of Fresenius’ commercial requirements for ESAs for use in
managing the anemia of its hemodialysis patients in the United States and Puerto Rico, based on forecasts pro-
vided by Fresenius and subject to the terms and conditions of the agreement.
These entities’ purchasing leverage has increased due to this concentration and consolidation which may put
pressure on our pricing by their potential ability to extract price discounts on our products or fees for other serv-
ices, correspondingly negatively impacting our bargaining position and profit margins. The results of these
developments may have a material adverse effect on our product sales and results of operations.
Our marketing of ENBREL is dependent in part upon Wyeth.
Under a co-promotion agreement, we and Wyeth market and sell ENBREL in the United States and Canada.
A management committee comprised of an equal number of representatives from us and Wyeth is responsible for
overseeing the marketing and sales of ENBREL including strategic planning, the approval of an annual market-
ing plan, product pricing and the establishment of a brand team. The brand team, with equal representation from
us and Wyeth, prepares and implements the annual marketing plan, which includes a minimum level of financial
and sales personnel commitment from each party, and is responsible for all sales activities. If Wyeth fails effec-
tively deliver on its marketing commitments to us or if we and Wyeth fail to coordinate our efforts effectively,
our sales of ENBREL may be adversely affected materially.
Our corporate compliance program cannot guarantee that we are in compliance with all potentially appli-
cable U.S. federal and state regulations and all potentially applicable foreign regulations.
The development, manufacturing, distribution, pricing, sales, marketing and reimbursement of our products,
together with our general operations, are subject to extensive federal and state regulation in the United States and
to extensive regulation in foreign countries. (See “ — Our current products and products in development cannot
be sold if we do not gain or maintain regulatory approval of our products and we may be required to perform
additional clinical trials or change the labeling of our products or take other potentially limiting or costly ac-
tions if we or others identify side effects after our products are on the market.” and “ — Difficulties, disruptions
or delays in manufacturing or failure to comply with manufacturing regulations may limit supply of our products
and limit our product sales.”) While we have developed and instituted a corporate compliance program based on
what we believe to be current best practices, we cannot assure you that we, our employees, our consultants or our
contractors are or will be in compliance with all potentially applicable U.S. federal and state regulations and/or
laws or all potentially applicable foreign regulations and/or laws. If we fail to comply with any of these regu-
lations and/or laws a range of actions could result, including, but not limited to, the termination of clinical trials,
the failure to approve a product candidate, restrictions on our products or manufacturing processes, including
withdrawal of our products from the market, significant fines, exclusion from government healthcare programs or
other sanctions or litigation.
The accounting method for our convertible debt securities may be subject to change.
A convertible debt security providing for share and/or cash settlement of the conversion value and meeting
specified requirements under Emerging Issues Task Force (“EITF”) Issue No. 00-19, “Accounting for Derivative
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